Monday, November 9, 2015

Jim Rickards: Recession Time

In his latest article for Daily Reckoning, Jim Rickards says he sees increasing evidence that we are heading into a global recession in the US. He repeats his view that the Fed will not raise interest rates any time soon. Below are some quotes from the article.


. . . . . . 

"Yet, we are picking up signals from a source even more powerful than central banks. This source is the specter of global recession.
It’s one thing for central banks to fight currency wars while the world is growing. That’s just a matter of stealing growth from your trading partners. When the pie is not growing fast enough, you can grab a bigger slice from the person sitting next to you with a cheap currency."
. . . . . 
"The average U.S. economic expansion since 1980 (a very favorable period for growth) lasted 77 months. As of now, the U.S. economy has been expanding for 76 months, since the end of the last recession in June 2009. Admittedly, it has been a weak expansion, but it’s an expansion, nonetheless.
Does this mean the U.S. economy goes into recession next month?
Not necessarily, but no one should be surprised if it does. Monthly job creation stalled out last November and has been shrinking ever since.
Disinflation and deflation have the upper hand on inflation. Many industrial production and purchasing manager indexes are flashing red. The Fed’s tough talk on interest rate increases hasn’t helped."
. . . . . 
"I have just returned from a visit to South Africa and the Middle East. I spent a lot of time with the top institutional investors and policymakers in both places. These are the areas getting caught in the crossfire of the currency wars.
The stories I heard are daunting. African commodity exports to China are collapsing. Middle Eastern dollar reserves are being depleted due to the collapse in oil prices and the resulting fiscal deficits.
What happens in China does not stay in China. It ripples around the world."
. . . . . 
"How will central banks stop the recession when they’ve used up their dry powder fighting the currency wars?
U.S. interest rates are already zero. Japanese interest rates are zero also. European interest rates are negative. All of these central banks have printed trillions of dollars in their respective currencies under various QE programs. They are at the point where they simply cannot print trillions more without risking political backlash or the collapse of confidence in their currencies.
What this means is that the recession cannot be stopped. It will have to run its course over the next year or so."

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